A medium-size general contractor listed on the first section of the Tokyo Stock Exchange effectively went bankrupt July 4 due to real estate-related debts that inflated after the burst of the bubble economy in the early 1990s.
Tokyo-based Tokai Kogyo Co., beset with liabilities of about 510 billion yen, applied to the Tokyo District Court on July 4 for application of the Company Rehabilitation Law, according to Teikoku Data Bank, a private research company. Tokai Kogyo is the first listed general contractor to go bankrupt since the end of World War II, Teikoku Data Bank said.
The amount of liabilities is the eighth largest since the end of the war. Tokai Kogyo was a major borrower from one of the failed "jusen" housing loan companies.
Established in 1946, it aggressively promoted business in the late 1980s with the construction of condominiums and office buildings. It also expanded orders from real estate developers by guaranteeing loans to them.
But after the bubble's burst and the subsequent recession, the firm fell into financial trouble in 1993, with its interest-bearing liabilities reaching nearly 220 billion yen. It was also burdened with 178 billion yen in other firms' loans that it had guaranteed.
Hokkaido Takushoku Bank, Tokai Kogyo's main bank, and three other financial institutions began helping the firm with such measures as lowering interest rates on the loans. But the prolonged recession in the real estate industry has hampered the firm's reconstruction. Its annual sales fell from a peak of 287 billion yen in the business year that ended in October 1992 to 197 billion yen in the latest accounting term, according to Teikoku Data Bank.